Suze Orman Says This Retirement Account Could Be Your Best Bet

Quick Read

• Suze Orman recommends Roth 401(k) plans over traditional 401(k)s because withdrawals are tax-free in retirement.

• Roth 401(k) withdrawals don’t count as taxable income and won’t trigger Social Security benefit taxes or higher Medicare premiums.

• Roth 401(k) contribution limits are higher than Roth IRA limits and allow more tax-advantaged retirement savings.

• If you’re thinking about retiring or know someone who is, there are three quick questions causing many Americans to realize they can retire earlier than expected. take 5 minutes to learn more here

When it comes to investing for retirement, Suze Orman -- a noted financial expert, author, and TV personality -- has a lot of strong opinions.

One of those opinions relates to which account you should be investing in. Specifically, Orman thinks that, for many people, one particular retirement plan conveys very special tax advantages and may be the ideal plan for most current workers and future retirees.

Here's the plan Orman thinks is the right one, along with some details on why she thinks this account is your best bet.

Orman is in favor of using this account to save for retirement

When discussing retirement investing, Orman has been clear on her preferred account, including in this blog post, where she evaluates different account types. As Orman has made clear in this post, and in other online commentary and interviews, she believes that a Roth 401(k) is your best option if it is available to you.

Roth 401(k) accounts are offered by a growing number of employers, as Orman explains. They also offer you tax breaks in retirement, instead of when you make contributions. For example, with a traditional 401(k), if you invested $10,000 in 2025, this would reduce your 2025 taxable income by the $10,000 you contributed. The government subsidy would make it easier to invest because of the fact that your take-home pay isn't affected as much. The tax savings offset some of the contributions you made.

However, if you choose a Roth 401(k) instead, you don't get that $10K in tax savings. Instead, you contribute with after-tax money. In exchange, though, money not only grows tax-free (as it does in regular 401(k) plans as well). It is also withdrawn tax-free as a retiree, provided you follow a few basic requirements. So, you essentially skip your tax savings now in favor of more tax savings later in life.

Why does Orman believe a Roth 401(k) is your best bet?

So, why is Orman in favor of Roth 401(k)s?

It's simple: She wants people to be able to take advantage of the great tax savings they offer.

That's the same reason she is also a fan of Roth IRAs, which are an alternative to traditional IRAs. Like traditional 401(k) plans, traditional IRAs give you the tax break up front, while Roth IRAs delay it.  However, while Orman likes this feature of Roth IRAs, she has also pointed out that the contribution limits for a Roth IRA are lower than the contribution limits for a Roth 401(k). So, if you choose to take advantage of the Roth benefits, the Roth 401(k) gives you the chance to do more of that with more of your money.

Orman also suggests using Roth over traditional accounts because not only do you get to avoid taxes on withdrawals as a retiree (which may be important if you are on a fixed income), but you also may be able to avoid taxes on Social Security benefits and avoid higher-than-normal Medicare premiums. That's because both Social Security taxes and Medicare costs are affected by taxable income -- but income from a Roth 401(k) won't count in causing you to be taxed on benefits or pay more for your Medicare coverage after age 65.

It's absolutely worth thinking about a Roth 401(k), especially if you are in a lower tax bracket right now but expect that future tax rates will be higher, either because you think overall rates will rise or because you expect to be in a higher income tax bracket as a retiree. A financial advisor can help you determine if this is likely to be your situation, and if a Roth 401(k) is thus the right choice for your retirement savings efforts.

The New Report Shaking Up Retirement Plans 

You may think retirement is about picking the best stocks or ETFs, but you’d be wrong. See even great investments can be a liability in retirement. The difference comes down to a simple: accumulation vs distribution. The difference is causing millions to rethink their plans.

The good news? After answering three quick questions many Americans are finding they can retire earlier than expected. If you’re thinking about retiring or know someone who is, take 5 minutes to learn more here.